On Friday 05 December 2008 11:25:00 am Von Fugal wrote: > Obama is still going to "buy a yacht." He's just going to do so on a > smaller budget. You're solving the amount of inflation, but not the > distribution problem. > > > > The printers benefit (the government gets more power, more pet > > > projects, hidden taxation). The first receivers benefit. This is > > > demonstrable in several ways. First, they get to sell more of their > > > product than they would normally. They get more business. More business > > > for any business is good business and most certainly a benefit. > > > Secondly, and highly related, they experience an increased demand for > > > their product. Supply/demand dictates that with an increased demand > > > comes an increased cost. They not only get to sell more of their > > > product, they get to do so at a higher charge. Lastly, they get to use > > > all this extra money they got from doing extra business at extra charge > > > to increase demand at the next level of the chain. > > > > Okay, so yes, there may be an additional increase in demand from putting > > the new currency into curculation. This would raise prices--meaning more > > profit for those producers. But, it doesn't have to be done this > > way...read on. > > > > > If you somehow manage to keep the money > > > supply/capita ratio constant, then yes, overall prices don't go up. But > > > prices DO go up on that first step, then of necessity prices drop > > > elsewhere. Where? Most likely in wages and compensation, small > > > businesses, etc. > > > > Here's a kicker for you. If the government budget is required to stay the > > same, regardless of printing new currency, then taxes collected must > > decrease by as much as the new currency--thus the government buying power > > stays the same, while the population's buying power increases. There's no > > increase in demand directed at the suppliers of the goods and services to > > the government. At worst there would be an increase in demand for > > whatever the entire population buys--everything!. Oh, but wait...the > > capita increased--so the per/capita buying power did not increase after > > all... which is exactly what we wanted. Solution? Perhaps. > > How do you propose to keep the government budget the same? How do you > propose to decide ahead of time what the government budget will be for > today and forever afterward?
I didn't mean same as in never changing, I meant same w/respect to new currency. So if they are collecting a 10% income tax, and issuing 3% new currency, then the tax gets reduced to 7% (or whatever it works out to so that their actual budget amount collected from what would have been a 10% tax is the same). I didn't mean they couldn't change the tax rate and thus their budget. I also don't mean that the gov't could do defecit spending by issuing new currency. That would not be allowed, period. That is not a power they would be granted. > I can see what your saying, and it sounds good in theory. How would it > be? To always have the same paycheck, it's always enough (and in fact > buys me more and more as the economy grows) and always the same taxes > that never increase? That's a splendid ideal. I fear it places far too > much trust in the government. Wouldn't it be wonderful if we could trust the elected representatives? Who else in history ever expressed that ideal--understood that it was impossible, and thus implemented checks and balances...? Since, as you remind us, power corrupts (has done so and is doing so), the only solution is to remove that power. > Also the fact remains, that even though the government has a constant > budget, it still aqcuires that budget dispraportionately to the market. > It's suppliers are constantly better off, and their suppliers, while the > low end businesses are constantly at a disadvantage. How is this so? (And like I clarified, I didn't mean the budget could not change.) If the budget is a percentage derived from the exchange of goods and/or services (income tax and/or sales tax), how would that ever be disproportionate to the market--I'd say that would make it always exactly proportionate to the market. > > > > Are you talking about monetary inflation or price inflation? In some > > > > ways, yes. In all ways, no. > > > > > > Price inflation IS monetary inflation. The only other way to get price > > > inflation is with severe economic downturn. That is to say, a > > > pronounced decrease in production, in wealth. > > > > There are at least three definitions of inflation: > > - monetary inflation - an increase in the money supply > > - decline in the real value of money - decrease in purchasing power > > - price inflation - increase price levels - this is the reigning use of > > the term today > > > > They all can have the same effect, but have different causes. > > They all have the same effect AND the same causes. > Definition: cause > price inflation: decline in money value or decreased supply (production) > decline in money value: monetary inflation or decreased production > monetary inflation: well this has one cause, and is one of the causes > for the other two. > > Following the dependencies, we get > monetary inflation: purely causative > decline in money value: monetary inflation or decreased production > price inflation: monetary inflation or decreased production > > So monetary inflation is one of the causes of all other inflation. The > only other cause is decreased production. If you have a precious metal (or other commodity) as currency, then you can have a decline in the real value of that currency because it is tied to the production of certain supplies as a resource. (eg, gold is used in producing electronics and jewelry--if jewelry goes out of fashion, or electronics finds a better material than gold, it's utility value declines, demand for it declines, and it's value thus declines.) /* PLUG: http://plug.org, #utah on irc.freenode.net Unsubscribe: http://plug.org/mailman/options/plug Don't fear the penguin. */
